Mining Stocks Seen as Cheap Gold Alternative: Chart of the Day

Dec. 19 (Bloomberg) -- Shares of gold-mining companies have
become a relatively cheap alternative to buying the metal they
produce, according to Jack Ablin, chief investment officer at
BMO Private Bank.

The CHART OF THE DAY displays the ratio of the NYSE Arca
Gold Miners Index to the price of gold in New York trading on a
monthly basis since September 1993, when the industry gauge was
created. Ablin, based in Chicago, highlighted a similar chart
yesterday in a research note.

Yesterday’s ratio was 0.75, close to this year’s low of
0.70 on May 15. The earlier figure was the lowest since November
2008, when a financial crisis tied to the U.S. housing market’s
collapse sent stocks and gold tumbling.

“Gauging the right price for gold is a psychological
marathon,” Ablin wrote, because demand goes beyond industrial
companies. “The miners appear to be one defensive way to play
the precious metal.”

Jewelers and technology-component makers were responsible
for 51 percent of demand last quarter, according to data from
the World Gold Council. Gold bar and coin producers, exchange-traded funds and central banks accounted for the rest.

The NYSE Arca index has lost 12 percent this year after
falling 16 percent in 2011. It’s poised to drop in consecutive
years for the first time since a three-year losing streak ended
in 1998. Gold is 6.6 percent higher this year and is headed for
its 12th straight annual gain.